Capitalism & Billionaires

Whenever we hear about tax increases, politicians say they want to tax the rich. When you ask to define rich, they try to pick a number that most Americans will think is “not them”. They will typically say, “anyone making over $500,000 per year.” In most political speeches politicians will say, “We want billionaires to pay their fair share.” Or you may hear a few politicians saying, “Greedy corporations need to pay more.”

The U.S. has decided to use a capitalistic economy. This means that the means of production comes from private companies. The opposite of a capitalistic economy is a socialistic economy. In a socialist economy, the means of production comes from the government. To be fair, there are benefits that can be argued for each type of economic structure. However, it turns out that capitalism has proven to be the superior economic system.

Capitalism has pulled more people out of poverty and improved the lives of its citizens with innovation, wealth creation, and liberty. Socialism has led to stagnation, poverty, and communism. This is not my opinion. It is fact. The countries who have embraced socialism include: The Soviet Union / Now Russia; Mainland China; Vietnam; North Korea; and, most recently, Venezuela. The countries who we call capitalistic have used capitalism in most of their economy; and still use socialistic social programs for a portion of their economy. This includes the U.S.

The contrast in lifestyle is obvious between socialistic and capitalistic countries. Still many young people in the U.S. are attracted to the idea of socialism. Why? They are convinced that wealthy billionaires, and gigantic and wealthy corporations hoard wealth that could otherwise help them in their circumstances. They argue, “If these “fat cats” weren’t so rich, we wouldn’t be so poor.” Sadly, this couldn’t be further from the truth.

It takes capital, or assets to create companies. In the private sector, company owners must convince investors that their idea is worthy of investment. The leaders of these businesses figure out how to offer their community valuable products and services while also earning enough wealth to repay investors, pay employees, build factories, and build the assets they need. If successful, these companies become wealth creating machines for their founders, their investors, their employees, and their communities. If failures, these companies cease to exist. Their investors lose money, employees need to look for work elsewhere, and their customers find better businesses to serve their needs.

Because it takes capital to create these companies, the investors of these companies seem to be quite wealthy. Billionaires have a net worth that exceeds one billion dollars. This doesn’t mean that this person is sitting on one billion dollars in cash. It means that their assets exceed one billion dollars. Their assets include the companies that are creating wealth for their investors, themselves, and their employees. Because we have a capitalistic economy, this wealth is held by individuals, not by the government. As fate would have it, this wealth is fleeting. Sears is a great example of the rise and fall of a capitalistic company that started in 1880, grew throughout the 20th century, and then went bankrupt in 2022. Sears created wealth for many of its shareholders, provided employment for thousands of workers, and provided quality goods and services to its customers while it was in existence. The wealth that was created by Sears is re-invested in new companies, employees who worked for Sears purchased homes, cars, and other products that grew the U.S. economy. Any wealth that was created because of Sears was taxed and given to the U.S. government to provide government services.

The alternative to having this capital in the hands of private individuals is to have our government own the capital. Here’s why this doesn’t work. The government has no incentive to create wealth. They don’t care if their employees gain wealth or not. If the government owns the means of production, no other company will compete. There’s no reason if they must compete with a government with unlimited financial resources. This means that employees who are underpaid by the government have no alternative but to keep their low paying job.

The best example we have of a government social service is the U.S. Post Office. This was a government service that had all the best of intentions. In its early days, the postal service was a necessary means of communication. Even today, people like sending and receiving items through mail. The fact is that the U.S. Postal Service loses between $2-Billion to $5-Billion annually. It will never go out of business because the federal government will continue to pay for its losses. The average pay for a postal worker is below $15 per hour. Most of the mail we receive today is junk mail from bulk mail services, not deliveries from family or friends. The post office has found it can make extra money by delivering for Amazon.

As amazing as this may be, Federal Express and other private delivery companies have managed to beat the U.S. Post Office. These companies make great profits, provide excellent service, and pay their people much better than the U.S. Post Office. Federal Express starts their employees at the average pay of the U.S. Postal Service. Their average pay for entry level workers is between $14.48 to $28.46 an hour. They charge more for delivery than the U.S. Postal Service and yet, customers use them to get packages delivered quickly to your doorstep, instead of to your P.O. box.

FedEx is owned by many different investors. The primary investors of FedEx are people who have 401k investments to earn money for their retirement accounts.

Fred Smith founded FedEx in 1971 after returning from a tour in Vietnam as a U.S. Marine, and is now worth over $5.0 Billion. FedEx lost $29 million of its investor’s money in its first 26 months. FedEx kept afloat after Fred won $27,000 at the blackjack tables in Las Vegas.

Yes, Fred is a billionaire. His billions are now invested in other capitalistic ventures. This is what makes capitalism a self-sustaining economy, while socialism is a naturally dying economy.

What about roads, schools, and courts?

Yes, the U.S. has several social programs that benefit the public. Some services do not lend themselves to the benefits of a capitalistic economy. Even these public services are often completed by private companies. When a road is constructed, the government is the customer, and several private sector road construction contractors compete to complete the project for the best price, and best quality.

Some Americans are questioning whether public schools are filling our need for education. Wealthy individuals who can afford it are paying additional funds to put their children in private schools where the public schools appear to be failing at their core mission of education.

The courts, legislation, policing, and executive branches of government serve as objective government agencies to regulate the private sector and represent all our interests. Still these entities seem to be highly influenced by campaign contributions by profits from capitalistic interests.

The Government’s Role in a Capitalistic Economy

The government has a very important role to play in a capitalistic economy. The government’s role is to:

• break up monopolies,

• tax income fairly,

• ensure workers are allowed to bargain with employers,

• protect the environment,

• regulate and tax global trade, and

• regulate private companies equally for the good of the public.

The government has no role in doling out money to favor one industry over another or one company over another. Unfortunately, that seems to be a normal mode of operation for our current government.

The Moral of this Story

I’ve rambled a bit long. However, I wanted to close with this idea. Capitalistic economies will have billionaires. That’s a good thing. Why? Because billionaires invest. Investment drives a economy that enriches all people. Socialistic economies have few billionaires. The folks who become billionaires in a socialistic society are the government leaders or dictators. You won’t hear the press say anything bad about billionaires in a socialistic economy. Why? Because there is no free press.

Next time you hear of a Jeff Bezos, Fred Smith, Elon Musk, or Bill Gates, think of how they have made our collective lives better… instead of buying the class-warfare spin from those who don’t know better.